College Cost Impacts of COVID

Students who have received a financial aid award for the coming school year should be aware that the costs quoted are most likely 2019-2020 costs. Few, if any, colleges have posted their 2020-2021 school year costs. Many public schools have some version of what my son’s school posted about next year’s costs on their website. The coronavirus is hammering state budgets between increased spending on unemployment, healthcare and emergency services and declines in tax revenues. College budgets have suffered from loss of housing and meal plan revenues plus the increased costs of providing online instruction.

State schools are likely to face a further revenue crunch if out-of-state and international enrollments decline. About 3/4 of US college students attend public colleges, including community colleges. If you’re among that majority, or planning to be, you should be prepared for tuition increases.

How can you insulate yourself from sticker shock, especially when you likely need to accept or decline admission before even knowing your cost of attendance? A few suggestions:

Confirm with the financial aid office whether your financial aid award will increase to keep your Cost of Attendance the same if the actual cost of attending increases.

If your state offers free community college, apply now! Typically you must apply as a high school senior; depending on your state, you may be able to use free community college up until you’ve earned two years of college credit. Spending a term at a community college or doing dual-enrollment may be a good cost-saving solution, especially if your campus isn’t opening in the fall anyway (hate to be the bearer of bad tidings). If you go that route, you’ll want to confirm with your four-year college whether taking community college classes will impact your financial aid award.

If you haven’t already committed to housing for next year, consider staying in on-campus housing if available. That’s because most residence halls refunded housing costs when they closed down this year, but most private housing held students to the terms of their lease. If schools don’t open on time this fall, apartment landlords are likely to still be charging rent.

You might consider accepting (and paying a deposit) for your second choice school if your first choice is teetering on the edge of affordability. If you do this, ask if you can delay acceptance or if your deposit will be refunded in the event that costs are substantially different from expected.

The vast majority of private schools will also be facing budget issues, even those with substantial endowments. My daughter’s college sent a recent email outlining financial challenges they are dealing with due to COVID:

“Increased national economic stress, resulting in economic challenges for many families and requiring increased financial support for a number of our students, which we are committed to providing.

“With the dramatic decreases in equity and other financial markets, a corresponding decrease in the value of our endowment and hence in the annual payout from the endowment to support the University’s work.

“For similar reasons, a decrease in the expected philanthropic contributions to the University from our alumni and friends.

“Significant decrease in net revenue in the Medical Center due to the extensive work connected to COVID-19, with a corresponding decrease in available Medical Center support for academic work.

“Uncertainties in the credit markets that are important for new capital projects.

“Uncertainties in private and federal research funding opportunities following the COVID-19 crisis.”

These are unfortunately common issues faced by most academic institutions.

P.S. No sooner did I post this than I got an email from my daughter’s school saying, “In response to these challenging times, there will be no increase in the combined total of tuition, housing, and fees for College students in the 2020-2021 academic year. The detailed breakdown of charges for each area will be finalized in the next few weeks.” I cannot say enough good things about how the University of Chicago has managed through this crisis.

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The College Financial Lady

Hi, I’m Ann Garcia, CFP®, the College Financial Lady. I’m a fee-only, fiduciary financial advisor. I help families plan and finance affordable college education. I’m also a mom to college-aged twins, so I’m right there with you.

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